Mini Budget: "The Future is Bright, So Let’s Not Be Blue" says Jane Ollis

Thursday July 9, 2015

Focus on the finer details obscures fine progress of UK economy

The first Conservative budget in almost two decades has certainly whipped up a storm.

Shorn of the need to add a dose of Liberal yellow to the plans he held up in the famous old red Budget Box, George Osborne made the most of his new found freedom and revealed some bold policies and initiatives designed to keep Britain booming and to match its ‘big ambitions’.The topic taking up the largest percentage of column inches - and causing some of the fiercest debate - was the new national minimum wage. The sharp rise (jumping to £7.20 next year and rising to £9 by 2020) was unexpected and the business community seem torn on the long-term implications of the move.

But in the usual hypercritical post Budget postmortem too many people are missing the bigger details by overly focusing on the fineprint. Britain is in good shape and the latest Budget is designed to build a framework to keep us on firmly on the right track.

Too much focus on the living wage

The first budget of a new government is traditionally the boldest of a parliament as chancellors know they have several years ahead of them before needing to consider the ballot box. Osborne has continued that trend as can be seen from the public split on a range of strong decisions on everything from Sunday trading, to welfare cuts to BBC licence fee amendments.

On the topic of the new minimum wage the business community is clearly divided. The Institute of Directors accepted the time had come for such a move, whilst the Confederation of British Industry were critical. Journalists served up a wealth of comment from business owners praising and condemning the move in equal measure and challenging Osborne’s claims that other tax giveaways such as corporation tax cuts and amendments to the National Insurance system offset higher wage costs to businesses.

But for me the issue is a red herring. The key issue isn’t about how much we pay our workers but it is about the productivity of those workers.

British business is doing very well but we could be doing so much better. I’ve written before about how productivity wise we are one of the G7’s poor relations. This is the problem we need to solve.

It always surprises people in the UK to hear that French workers are 13 per cent more productive than those in the UK. Even worse, when Britain’s notoriously long working hours are taken into account that difference rises to a whopping 27 per cent.

Business needs to be smarter and rather than viewing the rise in the minimum as an unfair burden, business owners should look to see what changes they can make in their practices, methods and technology to boost productivity.

This is nothing to do with having to crack the metaphorical whip harder, it’s about finding ways to do business better. A business plan that relies entirely on paying low wages seem to me fundamentally flawed. Creative entrepreneurs should view this as a positive challenge.

How can they improve productivity by making their workplace smarter and more innovative? Done correctly this should boost job satisfaction for staff - remember it’s about being smarter not tougher - whilst also putting more money in their pocket. The boost in productivity should more than set off extra wage costs and a happy workforce makes a productive workforce (further boosting productivity).

None of this even takes into account the lowering of corporation tax and the amendments to the National Insurance system designed to help businesses offset wage rises. All of which help build a framework to support business.

So rather than viewing the new wage standard as a problem, SMEs should view it as an investment in productivity, one that can reap huge rewards.

The future is bright so let’s not be blue

We can hyper analyse the wordings and implications of each policy and proposal but we have what we have - so let’s make the most of it.

For me the Budget sent the right message to UK businesses and is putting in place the drivers that will keep moving us forward. The business community now needs to continue working the magic it has with the tools it has to maintain the economic renaissance.

In our frantic rush to deconstruct the Budget we often lose sight of the bigger picture. Britain is a great place to do business at the moment and even if the government doesn’t always get things exactly right, the UK is a country that is actively supporting business.